Cable Fights Calif. Web Tax

California operators have banded with Silicon Valleycompanies to support a state proposal that will fend off taxes on Internet-serviceproviders, at least for a while.

The executives support the so-called California InternetTax Freedom Act, which aims to keep online commerce growing, unfettered by sales and othertaxes. The bill passed the Assembly nearly unanimously this past fall. It is modeled alongthe lines of a similar bill contemplated by Congress.

"Actually, we're for a moratorium, period, withno sunset," said Dennis Mangers, vice president of governmental affairs for theCalifornia Cable Television Association.

But it is unlikely that an open-ended bill will pass. Thestate's cities' lobby said any bill that strips members of their ability to levytaxes cuts them off from their life's blood.

Further, they are concerned that exceptions outlined in thebill that they must qualify for before charging ISPs taxes will make it more difficult forthem to account for applicable revenues for franchise fees.

One official said he is concerned that cable will sheltersome video costs, attributing them to Internet categories.

California officials hope that they have the same successas operators and ISPs in Alabama, which recently saw Gov. Fob James sign a bill thatexcludes Internet service from utilities' gross-receipts taxes and service-use taxes.